Power firm settles gouging claims

Duke Energy Corp. agreed Tuesday to pay $207.5 million in cash
and accounting credits to consumers and regulators to settle claims
of price gouging during California's 2000-01 power crisis.

A spokesman for San Diego Gas & Electric Co. said that the
utility's 1.3 million customers will eventually get about $14
million from the settlement, which must be approved by state and
federal regulators.

Consumer advocates, who say energy companies racked up
overcharges topping $40 billion during the power crisis, said they
were disappointed with the sum.

"It's very difficult to look at the settlement as anything but
pennies on the dollar," said Michael Shames, director of Utility
Consumers Action Network in San Diego.

Duke, based in Charlotte, N.C., controls about 5 percent of
California's total electricity-generating capacity, including a
large power plant in Chula Vista that serves San Diego County. The
company admitted no wrongdoing, saying instead that it agreed to
the payments to ease uncertainty among investors caused by ongoing
lawsuits, and the possibility that regulators would order
refunds.

"From our perspective, it was a business decision," said Pat
Mullen, a Duke spokesman.

Under the settlement, the company said it will pay $85 million
in cash to regulators and utility consumers in California,
Washington and Oregon. Duke also will give up claims to $122.4
million in unpaid bills from 2000 and 2001, most of them from
California's largest utilities, Pacific Gas & Electric Co. and
Southern California Edison Co.

In return, state Attorney General Bill Lockyer and other
officials will end investigations of alleged market manipulation,
and several private lawsuits will be dropped.

According to estimates by Lockyer, PG&E customers will
receive $86.3 million and Edison customers will get $39.3 million.
The San Diego utility's share, $14 million, is smaller mostly
because it bought much less power from Duke during the period.

Beginning in May 2000, energy generators and trading firms found
that they could simply charge higher and higher prices for
wholesale electricity under California's flawed attempt to
deregulate its utility industry.

Several investigations by academics and state regulators found
evidence that generators withheld supplies to create false
shortages and manipulate prices. California officials filed a
flurry of lawsuits and asked federal regulators to order $9 billion
in refunds.

State officials have kept secret many details about how they
arrived at the figure for alleged overcharges, including how much
money they think Duke owed state consumers. A spokesman for Lockyer
said the attorney general won't soon release any details, citing
continuing settlement negotiations.

"We are extremely confident that this deal is good for
California, and properly takes into account Duke's culpability for
Duke's overcharges during the energy crisis," said the spokesman,
Tom Dresslar.

The Federal Energy Regulatory Commission says it is still
investigating the matter of refunds. But the commission's chief
regulator has pressed the various parties to settle. Calculating
refunds has been called nearly impossible because power typically
changed hands dozens of times under California's auction system.
The commission issued a preliminary finding that energy firms owe
about $3 billion, almost precisely the unpaid bill from early 2001,
when Edison and PG&E stopped paying for electricity as they
neared insolvency.

Duke's was the third settlement of power-crisis claims this year
by a major generating company.

In April, West Coast Power, the company that owns the Cabrillo
power plant in Carlsbad and other big Southern California
generators, agreed in April to pay $281.5 million -- most of the
money in the form of dropped claims for unpaid bills from
California utilities. And last week, the federal commission
approved a settlement with Williams Cos. that Lockyer valued at
$417 million, but involved no direct payments to utility
consumers.